Text Size

COMING JULY 31: M.M. BREAKFAST WITH CFTC CHAIR MASSAD — Excited to announce that recently confirmed CFTC Chair Timothy G. Massad will join me for a special edition Morning Money Breakfast in DC on Thursday, July 31. Massad, who formerly ran the TARP program at Treasury, has plenty on his plate with enforcement of new Dodd-Frank rules as well as questions still swirling around extraterritoriality and end-user exemptions. Should be a newsy event. More details to follow.

WHY RUTH PORAT PASSED ON TREASURY — M.M. spoke at length on Friday with Morgan Stanley CFO Ruth Porat for a POLITICO piece coming tomorrow as part of a series on how some of the most powerful women in the world got where they are, how they lead and what advice they have for other women (and men) navigating the modern workplace. Here’s a little teaser on why Porat, who played a big role helping the government during the financial crisis, chose to withdraw her name from consideration to be Jack Lew’s number two at Treasury:

“There were two parts to it. One was we had worked really hard for a number of years to reposition Morgan Stanley and it felt like we were kind of at an inflection point where we had a lot of momentum and we were in a position to deliver on that and close a chapter on a painful time. … I saw that on the one hand and then a really painful, dysfunctional confirmation process which I thought ran the risk of freezing me out of being able to do my job as CFO for that entire period where you are in limbo.”

“And so it was kind of the worst of all worlds to put yourself in a position of being in limbo who knows where that would go when in fact there was so much that I’d worked so hard to deliver. I’m sad to say that I think it was unequivocally the right decision.

PORAT on her portrayal in Andrew Ross Sorkin’s “Too Big to Fail”: “[Laughter] It was fine. I don’t swear as much as Andrew would claim I do.”

CRISIS I: KERRY HEADS TO EGYPT — AP: “Secretary of State John Kerry is heading back to the Middle East as the Obama administration attempts to bolster regional efforts to reach a ceasefire and sharpens its criticism of Hamas in its conflict with Israel.

The State Department said Kerry would leave early Monday for Egypt where he will join diplomatic efforts to resume a truce that had been agreed to in November 2012. In a statement Sunday evening, department spokeswoman Jen Psaki called the U.S. and international partners ‘deeply concerned about the risk of further escalation, and the loss of more innocent life.’

“The Obama administration has toned down its earlier rebuke of Israel for attacks on the Gaza Strip that have killed civilians, including children, although both President Barack Obama and Kerry expressed concern about the rising death toll. The U.S. will urge the militant Palestinian group to accept a cease-fire agreement that would halt nearly two weeks of fighting with Israel. More than 430 Palestinians and 20 Israelis have been killed in that time.”

CRISIS II: WHITE HOUSE HIT AS TIMID ON RUSSIA — WSJ’s Siobhan Gorman:

“The political fault lines over American foreign policy cut deeper Sunday, with Republican lawmakers arguing that the U.S. reaction to the shooting down of the Malaysia Airlines jetliner marks the most recent in a series of events in which Obama administration has failed to lead. Several Republicans … criticized the Obama administration as ‘tepid’ and ‘timid’ for its unwillingness to take a harder line with Russian President Vladimir Putin, amid evidence that Moscow provided the antiaircraft systems used by pro-Russian separatists in Ukraine to shoot down the passenger jet ..

“The administration is grappling with a mounting number of overseas crises, including the renewed fighting between Israel and Hamas, sweeping gains by Islamic militants in Iraq and the Syrian civil war. … Kerry, who appeared on all five Sunday news shows, cast the administration's position on the downing of the jet as one of the responsible adult balancing complex and often competing national security needs. … Still, he fueled Republican critiques when he stopped short of fingering Russia and Mr. Putin for the disaster, instead blaming the separatists Russia supports” http://on.wsj.com/1p6yUnc

RUSSIAN BILLIONAIRES FREAK OUT — Bloomberg’s Henry Meyer and Irina Reznik: “Russia’s richest businessmen are increasingly frantic that… Putin’s policies in Ukraine will lead to crippling sanctions and are too scared of reprisal to say so publicly, billionaires and analysts said. If Putin doesn’t move to end the war in Ukraine in the wake of last week’s downing of a Malaysia Air jet in rebel-held territory, he risks becoming an international outcast like Belarus’s Aleksandr Lukashenko …

“‘The economic and business elite is just in horror,’; said Igor Bunin, who heads the Center for Political Technology in Moscow. Nobody will speak out because of the implicit threat of retribution, Bunin said by phone yesterday” http://bloom.bg/1ptkNa6

EURO ANGER GROWS — WSJ’s Anton Troianovski and Naftali Bendavid: “European leaders threatened harsher sanctions against Russia on Sunday … departing from initially muted tones in reacting to the disaster but leaving uncertainty over how quickly the European Union would be able to make good on its threats. Momentum built … for the European assets of prominent Russian businessmen and companies to be frozen as early as Tuesday ...

“Officials who have been pushing Europe to take a harder stance believe the crash marks a watershed. … But while support for stiffer sanctions appeared to be growing, EU officials warned that legal and bureaucratic hurdles could make it difficult to implement by Tuesday a major move to punish Moscow for lack of cooperation.” http://on.wsj.com/1zVtQYx

FIRST LOOK: LEO LOPEZ’S WIFE SPEAKS OUT — Per supporters of Leo Lopez, M.M.’s college friend who has been unjustly and outrageously imprisoned in Venezuela: “[This] morning at 10am at the National Press club, Lilian Tintori, wife of Venezuela’s top opposition leader Leopoldo López imprisoned by the Maduro government will speak at a National Press Club Newsmakers news conference — two days before Lopez is scheduled to go on trial in Caracas — and release a major report examining the charges against her husband and placing them in the context of the domestic political situation in Venezuela.

From the speech: “My name is Lilian Tintori. And since February 19, 2014, my husband

Leopoldo López has been wrongly imprisoned in Venezuela. … I am here today to call on President Nicolas Maduro to release my husband and hundreds of other political prisoners in Venezuela. With Leo¹s trial scheduled to resume in Caracas later this week, I am also here to release a White Paper, which speaks truth to power and tells the world

exactly what is happening in Venezuela with my husband’s case and the broader challenges facing our country.

“Leo is a politician ­I am not. I am a loyal wife and devoted mother, who is now alone in raising our two young children. Because he has temporarily been silenced, I have had no choice but to speak out on his behalf. … And this is what I have to say. No one in the world should doubt why Leo is in prison. President Maduro is afraid of him. And he has great reason to be. Hugo Chavez and Nicolas Maduro have not delivered on their

promises to our people and they have taken away our fundamental freedoms ­our rights of free speech, freedom of association, freedom of the press, and freedom to vote for candidates of our choosing.”

** There is broad bipartisan agreement that the Federal Reserve should have the authority to tailor its rules for the insurance industry. The Senate approved S. 2270, the “The Insurance Capital Standards Clarification Act of 2014” by unanimous consent. Now it’s time for the House to act. Learn more at www.responsibleregulation.com. **

BIRTHDAY TODAY: DODD-FRANK! — Today is Dodd-Frank’s official fourth birthday as a public law. … Email from Gene Ludwig, CEO of Promontory Financial Group and former Comptroller of the Currency, on the anniversary: “The Dodd-Frank Act made many sound changes to our regulatory system, but two distinct worlds of consumer finance are emerging. It’s a seller-beware environment for traditional banks, as supervisors ratchet up consumer-protection standards.

“But buyer-beware persists at many less regulated non-bank firms, even though the activities of the non-banks — lending operations, loan servicing, and new payment tools, from virtual currencies to mobile wallets — can be hard to distinguish from traditional banking. Any failure by these companies to build adequate protections into their operations risks serious consumer harm.”

Thorn Run Partners’ Jason Rosenstock: “While last week saw the usual suspects hold the type of ‘look back’ analysis one would expect … Better Markets marked the occasion by highlighting how the public still doesn’t trust ‘big banks,’ believes the markets are rigged, and favors stricter regulations. Interestingly, these polling results dovetailed with comments Senator Dodd made at a Bipartisan Policy Center event, where he noted a growing convergence by the far left and the far right against large companies in the financial services space.

“The bill’s namesake also indicated that he didn’t think the time was ripe for opening up Dodd-Frank to amendment in the near future, not because the law is perfect, but rather because today's hyper-partisan political environment even common-sense tweaks would be used by opponents of the law as an opportunity to overturn the measure. We wonder if a Chairman Shelby would concur.”

NEW POLITICO POLL SHOWS ECON #1 ISSUE — New POLITICO poll out this a.m. finds that that while voters appear to have strong opinions on foreign policy and national security, it is unclear how powerfully those issues will weigh on the

2014 elections. When asked to name the issues that would matter most, just 11% named foreign affairs, national defense or terrorism. By contrast, 31% chose the economy as most important” http://politi.co/1jKGJsD

FIRST LOOK: DELOITTE ADDS TOP NAMES — Per release out this a.m.: “David Wright, senior vice president and deputy director of the Federal Reserve Bank of San Francisco’s supervision and regulation division, and David Wilson, a former lead examiner and risk committee co-chair with more than 30 years’ experience at the Office of the Comptroller of the Currency (OCC), have joined Deloitte's Risk Advisory practice.

Both will serve U.S. and international clients in Deloitte's banking and securities regulatory business”

THE BIG IDEA: ECONOMY BETTER THAN YOU THINK — Roger Altman write in TIME magazine: “Nearly seven years after the onset of the Great Recession, the national mood remains troubled. … Despite the pessimistic mood, America is experiencing a profound comeback. But in terms of the growth outlook, the news is good. Goldman Sachs and many private-sector forecasters project a 3.3% growth rate for the remainder of 2014. The first half of 2014 saw the best job-creation rate in 15 years.

“Total household wealth and private employment surpassed 2008 levels last year … As halting as the U.S. recovery has been, the economy is now leaner and more capable of healthy, sustained growth through 2016 and beyond. Our outlook shines compared with that of the rest of the industrialized world, as Europe and Japan are stagnant” http://ti.me/1zVsgps

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Patrick Temple-West on whistleblowers and the SEC [http://politico.pro/1p6wRPW] … MJ Lee on Jeb Hensarling vs. the Chief Pickle [http://politico.pro/1qvBgjg] … To learn more about Pro's subscriber-only coverage -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD MONDAY MORNING — M.M. is on CNBC’s Squawk Box at 6:00 a.m. to lay out the week in politics. Tune in or later readers can look for clips on Twitter.

MARKETS SHRUG OFF TURMOIL — WSJ’s Dan Strumpf, Alexandra Scaggs and Chris Dieterich: “Investors have grappled with many obstacles this year, ranging from the withdrawal of the Federal Reserve's postcrisis stimulus to patchy economic growth and military flare-ups in Ukraine and Israel. Their response? Buy the dips. The latest proof that fund managers are heeding this stock-market adage came on Friday, when the Dow Jones Industrial Average jumped 123.37 points, recovering almost all the ground it lost a day earlier after the downing of a Malaysia Airlines jetliner … The gain left the Dow just 0.2% below its most recent all-time high set Wednesday. The Dow has set 15 records this year after notching 50 last year.

“Investors and analysts don't see these latest developments in Eastern Europe and the Middle East as the type of events that are likely to spiral into wider conflicts. As well, the ratcheting up of tensions in these two regions doesn't yet pose a big threat to global growth. Many previous geopolitical threats have been shrugged off by markets, according to data from Ned Davis Research Inc. In the past century or so, the Dow's median response to previous crises has been to rise 4.6% in the first month after a first-day, 2.9% decline” http://on.wsj.com/1k7zmmm

FLOWERS SAYS REGULATION KILLING BANKS — FT’s Martin Arnold:

“One of the biggest private equity investors in the banking sector has warned that regulation has depressed profitability so much that lenders will struggle to attract sufficient investors to survive the next financial crisis. ‘All the stuff that has happened and all the rules we’ve introduced have depressed profitability and that is a real vulnerability,’ Christopher Flowers, the US private equity investor … told the Financial Times … ‘Nobody is going to invest in an industry with returns of 5 per cent.’ http://on.ft.com/1tonGeL

POLITICS BLAST: HILLARY WILL GET A CHALLENGE — WP’s Chris Cillizza: “With every passing week, one thing becomes ever clearer: Hillary Rodham Clinton is going to be the Democratic presidential nominee in 2016. This past week’s evidence came in the form of two polls — conducted by NBC and Marist College — of Democratic voters in Iowa and New Hampshire. In Iowa, Clinton led Vice President Biden 70 percent to 20 percent. In New Hampshire, Clinton led Biden by 74 percent to 18 percent … Despite those stratospheric numbers, it’s a near-certainty that Clinton will face some sort — or sorts — of primary opposition. Which begs the question: Why?

“To answer that, it’s important to remember that not everyone runs for president to win. Some run to promote a cause or a set of beliefs. Others run because timing dictates that they have to. Still others run in hopes of improving their chances of winding up on the ticket alongside Clinton … When it comes to 2016, the largest group of potential challengers to Clinton comes from the ‘cause’ category. Socialist Sen. Bernard Sanders (I-Vt.) seems intent on running … Maryland Gov. Martin O’Malley is term-limited, with his second term ending in January, and undoubtedly thinks a credible run for president might bolster his chances of a spot in a Clinton administration” http://wapo.st/1qUY3Rp

ALSO FOR YOUR RADAR –

GREIFELD ON INVERSION — Nasdaq OMX CEO Bob Greifeld:

“While Mr. Lew is right to worry about the erosion of the US corporate tax base, reducing the option of companies to shift their tax home to a foreign country in order to access cash that is trapped overseas is a classic case of treating the symptom and not the cause of the problem. Clamping down on inversions will not stop the deterioration of tax revenues — it will accelerate it — and will only hurt long-term U.S. competitiveness, globally.

“Inversion is an important, if misunderstood, tool in the kit of U.S. companies to raise needed capital, and for entrepreneurs to start new enterprises or expand existing businesses. It is a legal, well-regulated practice that can be exercised during the process of an international merger or acquisition in which a U.S. company ends up with more than 80 per cent of the shares in a new overseas firm”

HOUSE GOP PLANS TO RIP DODD-FRANK — WSJ’s Victoria McGrane: “House Financial Services Committee Republicans are mounting fresh criticism of the 2010 Dodd-Frank financial law in a report to be released Monday, contending that it failed to end the prospect of future government bailouts … Lawmakers on both sides of the aisle continue to debate whether the law went far enough in fixing flaws in the financial system that led to the 2008 financial crisis. Even Mr. Obama said in a recent radio interview that policy makers need to take additional steps to tamp down excessive risk-taking in the financial sector.” http://on.wsj.com/UlfyPN

GLOBAL INEQAULITY IS … FALLING — NYT Upshot’s Tyler Cowen: “Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yeti income inequality for the world as a whole has been falling for most of the last 20 years.

“It’s a fact that hasn’t been noted often enough. The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history” http://nyti.ms/1tonsV0

** It’s time for the House to pass the ``Insurance Capital Standards Clarification Act of 2014.’’ The Senate already approved the legislation, S. 2270, by unanimous consent and the House companion bill (H.R. 4510) has broad bipartisan support including more than 145 co-sponsors. This bill ensures that the Federal Reserve has the authority to write capital rules tailored for insurance companies instead of imposing regulations developed for banks. If this bill doesn’t become law, the Fed would be forced to impose bank-centric capital rules on life insurance companies, which could lead to higher prices for consumers and even force companies to drop some insurance products altogether. Banks and insurance companies are fundamentally different. The House should act to ensure the Federal Reserve does not take a ``one-size-fits-all’’ approach to regulation. Learn more at www.responsibleregulation.com. **